All businesses need to change with time and the ever-changing business regulations they operate in. If you are a business owner in India, you will surely have heard about the upcoming GST regulations. If so, you might also be wondering how it will impact the various functions of your company. To ease your mind, we have mentioned everything relevant about GST impact on supply chain over here
The most positive GST impact on supply chain would be the reduction in the number of warehouses placed in varied locations of India. It is a fact that most of the organizations compare the costs involved in maintaining a warehouse in various states and then choose those which are less costly. With the implementation of GST, most of the state and central taxes would be eliminated which will make companies realize that having a big warehouse at a central location is far better than having a warehouse in 10 different states. Companies will also get over the tactic of maintaining warehouses in each state to avoid central tax.
Experts also think that with time, the companies will focus on making the central warehouse more customer-friendly and cost-effective. For that, they will change the structure the design of the area so that the orders can be fulfilled with ease and without any complexities. Improved design will lead to quick delivery of products and it will further ensure higher levels of customer satisfaction. It will also boost the accuracy of the forecasts and reduce the wastage.
Usually, Indian state border checkpoints consume a lot of time of the transportation trucks as they need to do material scrutiny and ensure location-based tax compliance. It complicates the logistics process and leads to delays that increase the transit times in many cases. With the implementation of goods and services tax, it is hoped that the wait time at the checkpoints would reduce by a lot and there will be a smoother flow of goods within the country.
Goods and services tax is supposed to be low as compared to state taxes that are implemented by the state governments currently. Also, with the closing down of many warehouses, the company will get to save money on rent, manpower, etc. It will also save on distribution costs as the transit times are expected to be lower at state border checkpoints. All these factors would lead to the reduction in the final prices of goods which will make the customers happier than ever before.
Right now, many of the companies that have their own smaller warehouses depend on people to manage it rather than adopting technologies like a WMS. But such an attitude would not be pertinent when managing a centralized warehouse because the costs of maintaining a large warehouse without technology and only depending on human resources are higher than you ever thought. Hence, GST would help companies to adopt technology that will help the companies to achieve a true perfect order fulfilment process by synchronizing the orders of each customer in real-time with the warehouse activities.
It is also being predicted that the expected adoption of a centralized warehouse system will lead to the promotion of the spoke-hub distribution model in which a system of connections are arranged like a wire wheel so that all the traffic moves along spokes connected to the centralized hub. This system is probably more efficient and time-effective than any system you are following till date.
To sum up, it can be said that the goods and services tax is a trigger that will initiate a lot of new trends. It also has the potential to save many costs and boost efficiencies. It will improve the overall competitiveness of Indian supply chain management industry on an international scale.